Oversupply of rental apartments has slowed down land sales as developers focus on offloading current units before embarking on new projects, according to the latest property survey.
The Hass Property Price Index for the second quarter of 2018 shows that while there was a marginal 3.6 per cent increase in apartment rental prices in Nairobi and satellite towns, land prices stagnated.
The survey attributes the slowdown in land sales and rental asking prices to reduced circulation of money in the economy as a result of the interest rate cap.
“What this means is that the private sector can’t access credit to develop properties while consumers can’t access loans to purchase homes,” Hass Consult head of research Sakina Hassanali said.
She said the property market is not yet out of the woods.
Currently a two bedroom apartment in Roysambu along Thika Road ranges between Sh20,000 and Sh26,000 per month while the same in Westlands goes for between Sh65,000 and Sh200,000.
In South B a two bedroom apartment ranges between Sh20,000 and Sh35,000 while in Langata the same goes for between Sh28,000 and Sh45,000.
Analysts found that just before the rate cap law was introduced, land prices in Nairobi and satellite towns grew at 2.5 per cent and 8.1 per cent respectively compared to 0.23 and 0.5 per cent growth currently.
Currently Ngong and Ongata Rongai are the best performing satellite towns, a situation the report pegs on investors warming up to the two towns which will host passenger stations for the standard gauge railway.
“When infrastructure goes into an area, land prices are boosted but it takes some time for that area to get populated and for people to actually start demanding property in that area,” Hassanali said.
She said land prices for towns along the Thika Superhighway increased immediately the project was completed but it took a couple of years for property asking prices and rental prices to start rising.
“There is always a lag effect from the time infrastructure goes in and the time property and rental prices go up,” she said.
The upgrade of Outering Road has caused land prices in Donholm to record a 9.1 per cent annual growth with an acre costing Sh70.6 million while rental prices dropped 5.3 per cent during the same period.
The price of apartments in Kilimani dropped 2.3 per cent over the last year while land prices increased marginally by 0.3 per cent to cost Sh428.4 million per acre. In Upper Hill, an acre of land cost Sh559.7 million registering an annual growth of 1.6 per cent.